AP: WTO Condemns Airbus Aid

WTO ruled that European governments unfairly financed Airbus and harmed fortunes of rival plane maker Boeing, AP source said, even as Airbus claimed it won.

GENEVA (AP) -- The World Trade Organization ruled Tuesday that European governments unfairly financed Airbus and harmed the fortunes of rival U.S. plane maker Boeing, officials said, even as the France-based Airbus claimed it won.

Three officials with knowledge of the confidential WTO ruling said it upheld findings of an interim decision handed down last September that faulted European governments for providing Airbus with subsidies through risk-free loans, research funding and infrastructure support.

Airbus, however, said "70 percent of the U.S. claims were rejected" and that the WTO panel dismissed Chicago-based Boeing's claim that its performance suffered as a result of European subsidies. In that case, it would be a victory for Airbus and the European Union ahead of a possible June ruling on alleged U.S. subsidies to The Boeing Co.

While the WTO's report won't halt European subsidies for Airbus, the two disputes could provide tighter guidelines for how far governments can go in supporting companies in a market worth more than $3 trillion over the next two decades.

With emerging powers such as China looking to break the two-company dominance of the airliner industry, clearer rules on public support will become even more important in the future.

The three officials spoke to The Associated Press on condition of anonymity because of the sensitivity of the ruling. One official represented neither party in the dispute.

One official said the WTO panel found that Europe was, in some cases, unfairly subsidizing Airbus through "launch aid" because the planemaker only repays the loans as new planes are sold. For some planes, however, the U.S. failed to demonstrate that the subsidies actually harmed Boeing, a key requirement for proving wrongdoing.

But the three-member panel also found against Airbus' European backers Britain, France, Germany and Spain for providing illegal infrastructure support, research and development funding and export subsidies -- largely regarded as the worst form of unfair manufacturing support.

The Geneva trade body can't force countries or companies to eliminate subsidies, but it can authorize retaliatory sanctions against countries that fail to comply with rulings. It generally takes years to reach that stage, and based on the record slowness of this case, sanctions could be more than a decade away.

The United States brought the dispute to WTO in 2004 after pulling out of a 1992 agreement limiting subsidies in the aviation industry. Brussels responded with its countersuit.

Most analysts predict that the WTO will come down on payments by both sides. The balance of the verdicts could determine future negotiations between the U.S. and 27-nation EU to regulate subsidies in the aviation sector -- which most observers see as necessary to building new planes.

But he Washington-based Forerunner Foundation said the two disputes could still lead to sanctions through higher tariffs in the U.S. for Airbus planes, and in Europe for Boeing planes. That, in turn, would reduce competition and raise prices for jets, lower the number of aircraft in both markets and make tickets more expensive for American and European travelers.

Speaking ahead of the ruling, Boeing vice president Ted Austell said the WTO's decision was important for "the hundreds of thousands of U.S. aerospace workers who've had to compete with an illegally subsidized Airbus."

"There's a place for negotiations, but not on programs and actions declared inconsistent with WTO obligations," Austell said. "Illegal European subsidies have done great harm to the U.S. aerospace industry. It's time to level the playing field and let companies compete on product, price, innovation and customer support without market-distorting government subsidies."

But an Airbus statement said it "learned" that the ruling rejected Boeing claims of lost U.S. jobs. The company acknowledged the finding that past payments contained "a certain element of subsidy," but said the WTO's concluded that they caused no lost profits for the U.S. aircraft industry.

Airbus said the WTO also condemned its "noncompliant" research grants, but noted that these would affect Boeing worse when the trade body rules on whether the U.S. company benefited from billions of dollars in backdoor funding from NASA and the U.S. Defense Department.

Airbus beat rival Boeing in aircraft production in 2009, delivering a record 498 aircraft and maintaining its place as the world's largest planemaker, with Boeing delivering 481. Airbus also posted 271 orders, beating Boeing's 142.

The No. 2 position has rankled Boeing, which saw Airbus use hundreds of millions of euros in low-interest government loans to develop the A380 superjumbo. Now, it wants the WTO ruling to stop European governments from using the same strategy to fund its midsize, long-haul A350 XWB that aims to compete with Boeing's 787 Dreamliner.

Airbus said future funding plans for the A350 weren't affected by the ruling, and that the planemaker expects the dispute to "drag along for at least a few more years."

"Resolution will finally only be found in trans-Atlantic negotiations," it said.

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